Heritage Foundation challenges flawed views of N.C.’s unemployment picture

John Hood already has challenged the misguided assertion that the end of extended unemployment benefits has hurt North Carolina’s economy. Now James Sherk of the Heritage Foundation’s “Foundry” blog probes the latest unemployment data.

The Tar Heel State already ended extended UI benefits in July 2013. What happened afterward has caused considerable controversy.

No one disagrees that North Carolina’s unemployment rate began rapidly falling almost immediately after the state cut the benefits. The state’s unemployment rate dropped 1.5 percentage points between July 2013 and November 2013, the largest decrease in the nation over that time.

But many commentators, on both the left and the right, argue that this happened only because UI claimants dropped out of the labor force. They argue that North Carolina’s experience shows cutting or eliminating extended UI benefits will harm claimants with few offsetting economic benefits.

The data do not support this interpretation. Labor force participation rates fell sharply after North Carolina ended its extended UI benefits. But they fell sharply before, too. The rate of decrease did not change. Unless one argues that North Carolina’s participation rate would have suddenly leveled out, it becomes hard to attribute the continued drop to UI policies. …

… North Carolina’s employment-to-population ratio, however, stopped falling shortly after the extended UI benefits ended and has since improved. Most of the unexpected improvement in North Carolina’s unemployment rate since July comes from an improving labor market, not the continued drop in labor force participation.

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